RInfra allowed to recover Rs 350 cr from consumers

Reliance Infrastructure said that it has been permitted by the Supreme Court to recover Rs 350 crore from consumers which it offered as a rebate in tariff between 1999 and 2004 to stop them from switching to Tata Power.

The key issue now is how the regulator will decide the issue as the consumer base has risen significantly since and, more importantly, not all those who benefited from the rebate are in the RInfra fold. Further, with the larger user list, it is still a moot point on how appropriate it is to tax the current lot to make good the rebate offered a decade ago. “These are issues best left to the regulator,” experts say.

Tata Power's appeal against the order of the Appellate Tribunal of Electricity, stating that the RInfra rebate offering then was legal, has been rejected by the court, R Infra said. The Maharashtra Electricity Regulatory Commission (MERC) held that the rebate was illegal and added the amount to R Infra's earnings while reducing tariff for all consumers.

However, the Appellate Tribunal ruled in favour of R Infra, consequent to which Tata Power moved the apex court on the issue. The rebate was primarily given to high-end consumers.

Both Tata Power and R Infra operate in a regulated power tariff regime in Mumbai where electricity utilities furnish their annual revenue requirement (ARR) to MERC which, in turn, decides the tariff for operations.

MERC will now allow R Infra to recover Rs 350 crore which it denied earlier by notionally adding back the revenue and reduced the tariff in its order dated July 1, 2004. After the Appellate Tribunal ruling in 2006, MERC had, in fact, allowed this recovery in six months and passed an order directing R Infra to recover Rs 0.97 a unit from all categories of consumers. The order was not implemented as Tata Power moved the apex court.

A spokesperson for RInfra said the sum would be recovered through the ARR (which will be higher). The recovery cost per unit could be lower as the consumer base had since expanded and the period could also be extended.